Watching the Credit Crisis Like the Pros

Credit crisis... credit crunch... we all hear the terms, but what do they mean to the average schmoe?  Well, for one thing, it means that even though the Fed has lowered the 'Fed Funds' rate to 2%, and the yield on 10-year US Treasuries is around 3.80%, rates on things like mortgages, car loans, and credit cards are persistently high.  For example, Freddie Mac - one of the two big agencies that guarantees mortgages, the other being Fannie Mae - says that 30-year conventional, conforming mortgages averaged 6.52% with 0.7 points last week.  Conventional and conforming means that the borrower and the loan size meet Freddie's ever-stricter requirements, and points, for those who've never had a mortgage, are upfront costs.  One point is one percent of the loan - so the more points, the more expensive it is to get the loan.  Contrast this with the situation at the beginning of this year, when the credit crisis was already in full swing - 10-year yields were 0.20% lower, at 3.60%, but a 30-year mortgage guaranteed by Freddie was 0.45% lower, at 6.07% with only 0.5 points.  Go back further and the difference is even more dramatic - in the first week of January 2006, 10-year Treasuries gave a 4.37% yield, but a 30-year mortgage cost just 6.21%, with 0.5 points.  So government bond rates have fallen 0.57% since then, but mortgage rates have risen 0.31% and 0.2 points.  Not to mention the fact that nobody gets a mortgage anymore without 20% down, a good credit record, and firm proof of employment and assets.  At the beginning of 2006, banks were practically begging you take money, regardless of income or assets.